00:00Do we have a clear view on where inflation goes from here?
00:03I don't think we were ever going to be super clear on the impact that tariffs have directly to inflation.
00:09When you're looking at an inflation forecast, you can certainly look at which types of goods are receiving tariffs,
00:14how that might roll into the total number.
00:16But keep in mind, there is a bigger geopolitical context that's changing as well
00:21with respect to how goods are sourced, where supply chains are moving.
00:24That started during the pandemic, if not before.
00:27And so I think the conversation around tariffs and uncertainty and what it means,
00:31certainly for the deficit, is very reasonable.
00:33But the specific pass-through to consumers, I don't know that we were ever really going to have a great
00:39number on that.
00:40So in terms of the deficit, you're saying this is revenue that maybe is going away
00:43that could have helped to cut back the U.S. deficit.
00:46Or no, or yes.
00:47Well, that's the concern.
00:49Over the last couple of days, to be honest with ourselves and really any investor that I've been speaking to,
00:54most folks' range of average effective tariff rate was somewhere between 10% and 12% and 15% and
01:0116%.
01:02And it looks like that's where we're likely to net out, regardless of the authority used for those tariffs.
01:07And so that likely means we don't have a huge change in deficit assumptions.
01:12Really, the activity we've seen on the curve, I think, suggests that the market agrees with that.
01:18What about other inflationary pressures in terms of the president's big spending bill that he sent, you know,
01:24that was passed last year?
01:25So is that kind of tailwind for the economy?
01:28And that's inflationary, you know, in the long run?
01:31Tell us about kind of how you're gaming out inflation for this year.
01:35Yeah, that's really where the rub is.
01:38If you look at the broader economy picture, you have, of course, tariffs and that tax on the consumer.
01:44Again, difficult to handicap, but we know it's there.
01:46Same is true of global supply chains and geopolitical challenges.
01:49And certainly these fiscal tailwinds that we see supporting the consumer likely mean that prices are going to continue moving
01:55higher.
01:56Now, it's my view, and we've talked about this a bit before,
01:59that a strong inflation print a couple times in a row is probably one of the more disruptive events for
02:06this market pricing that we could see.
02:09However, it's not clear to me that that's going to be the mechanism that disrupts the market here in the
02:14next couple of months.
02:15I'm watching for it, but it's not in our base case.
02:18What I think, though, that that affordability challenge creates,
02:22talk a lot about how we don't really see that in the market.
02:24I don't know that I agree, because a lot of the spending and more, I'll call it populist-leaning policies
02:30from both sides of the aisle that we see
02:32are a reflection of knowing that the average American is struggling with affordability.
02:39What?
02:40We only have two minutes left, and there's a lot that we want to get to.
02:44Okay, so I want to get to a little bit of your view on AI and productivity.
02:51We don't have time to play the sound, but there's a lot of people talking about this right now.
02:56And, I mean, yesterday, IBM was the latest example of what happens to a stock that people think is under
03:00threat from AI.
03:01The productivity side of this, how do we look at that?
03:05So here's the real answer.
03:08None of us know.
03:10Certainly none of us in macro world know.
03:12You're in good company saying that.
03:14Certainly none of us in macro world know.
03:15Look, the way that productivity will be garnered from this technology is much more closely in the hands of the
03:22technology actors than in the macro and investment space.
03:27And so what we're all doing is crafting our scenarios.
03:29And one thing I'll say about our high uptake, medium uptake, low intake scenarios, they're all disruptive.
03:35And so I think what we need to focus on instead of the specific winners and losers, which I think
03:39are too early to identify, it's how do you get more accustomed to that disruptive market where leadership is changing
03:47the way it has been pretty regularly?
03:50I think it's tough.
03:51And I think, you know, the caveat is, and you are not alone, you know, Lauren, everybody says it's early
03:57on.
03:57We don't really know.
03:58And that even the report, the research report that came out yesterday, that it's just too soon to kind of
04:03figure out winners and losers and the impact.
04:06I mean, we did Fed Governor Chris Waller talking today about the U.S. Central Bank moving towards a system
04:10-wide deployment of AI across regional banks and its D.C. headquarters.
04:14But that's, again, it's a tool that everybody's playing with.
04:17Yeah, we should hope that they are, right?
04:19Everyone, the more we use AI, the more unfireable.
04:24I botched that, but the better it is for us.
04:26Your job is safe for today.
04:28Someone in the world said, if you're not using it, you've just got to start.
04:30Otherwise, you're behind.
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